An insurer’s perspective of
safety
A SARKAR
Chief Manager,
New India Assurance Co. Ltd.
HO,Mumbai
Contents
Risks covered by general insurers
Why is safety important to an insurer?
– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents
Adherence to safety – A ‘win-win’ for both
insurer and insured
General Insurers mainly cover the following risks
Construction of infrastructure such as roads, bridges, ports, airports,
buildings
Storage cum erection for factories, refineries, power plants
Marine cum storage cum erection (I.e. storage cum erection including
transit both overseas and domestic)
Advance loss of profit (followed by losses in above policies)
Operational cover after testing and commissioning such as fire, flood,
earthquake, machinery breakdown and Terrorism.
Third party liability.
Activities in any project involve
Design of layouts, machines, and processes
Procurement of goods/equipments
Installation of all necessary equipment at site
Testing of the completed installation
Post takeover operation/maintenance
Project insurance – Erection All Risk
Fabricator Local
Supplier
Intermediate
Storage
Civil const.
Site Storage
Erection
Foreign Testing
supplier Port Commn.
OPERATION
CONSTRUCTION
TRANSPORT FIRE
INTERMEDIATE MCE
MARINE FLOP
OFFSITE EAR (SCE)
(IMPORTS) MB
STORAGE CAR
MARINE BOILER
ADDITIONAL TPL
(LOCAL) MLOP
TRANSIT CPM
MARINE LOP EEI
ALOP
IAR MEGA
Operational insurance - Industrial All Risk Policy
•A single simplified, convenient, cost effective policy
Fire Machinery
Fire MLOP
Loss of Insurance
Insurance
Profit
Boiler Electronic Burglary
insurance equipment insurance
insurance
• Most Comprehensive coverage • depreciation not deducted in Machinery
–Not a named perils policy Breakdown total loss or partial loss claim
•Underinsurance to the extent of 15% waived
Contents
Risks covered by general insurers
Why is safety important to an insurer?
– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents
Adherence to safety – A ‘win-win’ for both
insurer and insured
Why is safety important for an insurer?
Safety is a part of risk management for reduction in risk before transferring
to insurance company
Risk Management
Risk Identification
Risk Evaluation
Risk Reduction Safety
Risk Transfer Insurer
Even though insurers come into the picture after the risk has been
transferred, still adherence to safety norms is essential from the point of
view of the insurer as well, because most accidents are a result of not
abiding by safety norms
Of course, insurance companies offer discount on premium if during pre-
acceptance it is established that safety norms are being followed
Contents
Risks covered by general insurers
Why is safety important to an insurer?
– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents
Adherence to safety – A ‘win-win’ for both
insurer and insured
Insurance company expects claims from
Losses arising due to
Fire, Lightning, Explosion, Riot & Strike and Malicious
Damage, Damage by Terrorist activities, Impact Damage.
Storm, Tempest, Cyclone, Flood, Inundation Rockslide,
Landslide, Subsidence, Earthquake and Similar Natural
Hazards.
Electrical/Mechanical Breakdown, Failure of Control Systems
Human Error, Negligence, Lack of Skill, Faults in Erection and
Error in Handling
Insurance company expects claims from
Losses arising due to
Burglary, Theft, Pilferage.
Design Defect, Consequences of Faulty Material,
Workmanship other than faulty erection
Loss of revenue / Payment of Penalties - due to delay in
commissioning.
Accident / Sinking of Vessel, non Delivery, Shortage, Damage
during Transit, Loading, Unloading Or any other accidental
causes
Fire losses – key reasons
Fire mostly occurred in storage areas
Fire mostly occurred in unattended areas or
during unattended periods Lack of
awareness
Not much importance is paid to fire protection of safety
in storage areas and
following
Inadequate training for fire emergencies safety
norms
No attempt to learn from past mistakes
Fire losses – key causes & safety measures
23%
18%
Key
10%
causes 8% 7% 7%
of fire 4%
Electrical
Friction
Smoking
Hot surface
Burner
flames
Spontaneous
Overheated
materials
ignition
Must be No Proper Away from Purged or Proper
Safety as per ISI smoking lubrication combustible inert stacking
measure condition
Loss prevention measures for ‘safety’ - Fire
Conduction Convection
Radiation
Loss prevention measures for ‘safety’ - Fire
Concept of passive fire protection
Compartmentation Segregation
Loss prevention measures for ‘safety’ - Fire
Concept of passive fire protection
Perfect Party walls Fire proof doors
Loss prevention measures for ‘safety’ - Fire
Concept of passive fire protection
Encasing Separating distances
Loss prevention measures for ‘safety’ - Transit
Case study
Collapse of bridge during crossing of
128 wheeler trailer carrying generator
turbine
River in spate, turbine lying in the
middle of the river bed
Cause of loss
Classic case of Bridge Structural
capacity imbalance
One bridge span larger than the total
length of 128-wheeler trailer
Complete Loaded Trailer Weight came
onto one bridge span
Loss prevention – safety measures
Route survey – roads/ bridges
Loss prevention measures for ‘safety’ - Erection
Case study
Shifting of heavy silos in progress at a
project site
Crawler crane in operation collapses
Heavy impact damage to silos, crane &
equipment stored underneath
Cause of loss
Uneven ground conditions
Crane encountered a quickly filled soft
ground spot
Loss prevention – safety measures
Check ground under base of crane
Loss prevention measures for ‘safety’ - Process
Case study
Un-confined vapor cloud
explosion from leakage of
hydrocarbons
Cause of loss
Pipeline (250mm dia. and 35 bar
press.) failed at sleeper-type
pipe support.
Small release continued from
bottom of pipe for 1 hour after
detection.
Refinery was put into crash shutdown & water curtains set up.
Full bore rupture following pressure surge when pipeline valve closed by
staff, without stopping supply pumps.
External corrosion and internal pitting evident
Normal pipe wall thickness = 7mm. Corroded section = < 1mm thick.
Loss prevention measures for ‘safety’ - Process
Loss prevention measures for ‘safety’ – Other perils
Losses Some examples of prevention measures for
arising out of safety
Earthquake & Design and construction of building to withstand the
similar natural shock of earthquake
hazards Ensure that boxes in warehouse are stacked wide
rather than high and secured in groups with ropes or
strapping
Place materials especially large components far
enough apart to avoid their damaging one another
when toppling over
Storm, tempest, Design building to withstand highest wind speeds
cyclone, flood recorded in 25 year period
Pay attention to weather forecast regularly and alert
emergency team/ fire brigade in case of sever
weather forecast
Loss prevention measures for ‘safety’ – Other perils
Losses Examples of prevention measures for safety
arising out of
Water damage Level of storage yard to be 0.5m above highest level
of river for the last 25 years
Constructing rain water drainage system for highest
rainfall in the last 25 years
Theft, pilferage Factory should be surrounded by compound wall
with entry possible only with identity proof through
guarded gate
Contents
Risks covered by general insurers
Why is safety important to an insurer?
– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents
Adherence to safety – A ‘win-win’ for both
insurer and insured
A ‘win-win’ for both insurer and insured
Awareness of safety among all
Implementation of safety processes
Reduction of claims to insurance companies
Increase in surplus of the insurance companies
Building up of good reserves and increased capacity
of insurance companies
Insurance companies can provide wider cover at a
lower premium without re-insurer support
Thank you
